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economics a dismal science?

economics a dismal science?

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economics a dismal science?

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  1. economicsa dismal science?

  2. Few people rely solely on any social science for their pleasures, and attaining a suitable level of ecstasy involves work. … It is a nuisance, but God has chosen to give the easy problems to the physicists. Lave and March (1995)

  3. what is economics? • economics is what economists do • study of economic interactions of human beings • core concept is exchange • integral to all life (“second nature”)

  4. social sciences social sciences biology biology economics chemistry chemistry physics physics what is economics? (cont’d) the real world (?) economic imperialism

  5. the origins of economics • developed out of moral philosophy • adam smith:“an inquiry into the nature and causes of the wealth of nations”, 1776 → “positive” v. “normative” science • leon walras, gerard debreu:“the theory of value”, 1959→ neo-classical school of economics→ “macro” model with microfoundations

  6. core concepts • general equilibrium • homo oeconomicus • invisible hand/walrasian auctioneer • game and contract theory • rationality • common knowledge

  7. current trends • evolutionary economics  • behavioral economics  • experimental economics  • cross-disciplinary research  • econophysics (the good, the bad, the ugly)

  8. the future: is econ becoming a science? • questions asked • scientific methods • measurement problem • modeling problem (e.g., path dependence) • methodological v. institutional individualism (“situational analysis”)

  9. differences between physics and econ • open v. closed systems • recurrence • stationarity • coupling • heterogeneity of “actors” • principal observer problem

  10. some observations and candidate explanations • small world networks in trading • price taking v. price making • volatility clustering and long-memory effects • crashes

  11. continuous double auction orders order book transactions size quantity dynamics depth granularity spread price volatility

  12. liability networks • exchange results in connection between buyer and seller → complex network of assets and liabilities→ entanglement → path dependence

  13. the principal observer problem • social sciences deal with behavior→ information ─ knowledge ─ action • behavior is a process • time runs from the future into the present and then back into the future again • “price taker” v. “price maker”or: • principal is observer is principal …→ are we all coupled?→ a “meta feedback”?